Google, Meta, and Snap have experienced a rebound in their advertising businesses, showcasing the growing adoption of artificial intelligence (AI) in drawing marketers to digital platforms. Despite an uncertain economy, these tech giants have surpassed quarterly revenue expectations and posted positive metrics for their ad businesses. The use of AI has proven instrumental in enabling advertisers to reach their ideal audience at the lowest possible price.
Google, in particular, has been investing heavily in AI technology, introducing tools like Performance Max that utilize AI to determine the distribution of marketing budgets across its ad network. Philipp Schindler, Google’s Chief Business Officer, highlighted the strength of the retail segment during the July-September period. The company has been actively preparing retailers for an extended holiday season, emphasizing the importance of delivering deals to price-conscious and convenience-seeking consumers. Alphabet, Google’s parent company, reported a 9.5% increase in ad revenue in the third quarter, surpassing Wall Street estimates. Additionally, its YouTube ads business witnessed a growth of 12%.
Meta (formerly Facebook) also showcased strong ad growth, with a 31% increase in ads viewed compared to the previous year. Despite a 6% decline in the average price per ad, this marked the slowest pace of fall in seven quarters. Meta has heavily relied on AI-powered marketing planning and ad measurement features to drive its growth, particularly in response to privacy changes enforced by Apple that limited its use of personal data for targeted advertising. The company is now introducing generative AI tools to create various iterations of ad campaigns, giving it an advantage over smaller rivals.
Snap, another player in the digital ad space, has seen success through its efforts to enhance ad-targeting tools with technology. The third quarter witnessed an increase in average revenue per user.
Analysts suggest that the ad market rebound remains on track, with retail companies leading the spending trend. They identify Google and Meta as the potential biggest beneficiaries, expecting them to dominate ad spend recovery and increase their portion of the advertising wallet. These tech giants are considered more resilient to uncertainty caused by geopolitical turmoil, such as the Middle East conflict, due to their wider reach and ability to attract a steady stream of advertisers.
However, Meta’s Chief Financial Officer, Susan Li, mentioned a softness in ad spending at the start of the fourth quarter, potentially linked to the Israel-Gaza conflict. Despite this, media research firm Magna has raised its forecast for US ad spending growth in 2023, projecting a 5.2% increase and a 9.6% rise in digital ad sales.
The adoption of AI in advertising is steadily gaining traction, attracting marketers to digital platforms even during economic uncertainty. Giants like Google, Meta, and Snap are leveraging AI to help advertisers connect with their target audiences efficiently and affordably. As the ad market rebounds, these companies are well-positioned to benefit from increased ad spending, especially in the retail sector. With their wider reach, they provide a stable platform for advertisers, and ongoing investment in AI technology ensures continued growth and innovation in the digital advertising landscape.